Lowering threshold for micro-enterprises will negatively affect business environment (CNIPMMR)

The transition to corporate income tax following the lowering of the threshold for micro-enterprises to EUR 100,000 would generate higher inflation, by transferring the increase in expenses to sales prices, decreasing the competitiveness of Romanian products and services and slowing down or even giving up on companies’ modernization/digitization projects, warns the National Council of SMEs (CNIPMMR), in a press release sent on Monday.

CNIPMMR rejects lowering the threshold for classification in the category of micro-enterprises from EUR 500,000 to EUR 100,000, resulting in the application of the 16% profit rate, instead of the 3% on income for micro-enterprises.

According to the source, compared to the profit of about 24 billion RON obtained by micro-enterprises with revenues between 500,000 – 2,500,000 RON (100,000 – 500,000 euros), in 2022, it follows that, if the 16% rate on profit were applied, they would pay a tax of about 3.85 billion RON. Basically, micro-enterprises would pay taxes with a total value of more than about 600 million RON, compared to the amount paid as 3% income tax, SMEs representatives say.

“If switching to the 16% corporate tax, following the lowering of the threshold for micro-enterprises to EUR 100,000, the change in the taxation system will negatively affect the business environment: the increase in expenses will be transferred to the prices of selling products and services, resulting in higher inflation; the increase in production costs generates a decrease in the competitiveness of Romanian products and services and the loss of markets; the lack of liquidity at the level of companies will lead to diminished investments and slowing down/giving up on modernization/digitization projects,” reads the document.

Also, the organization draws attention to the fact that the repeated and short-term modification of the tax legislation for micro-enterprises, such as the introduction from April 1 of new conditions for classification in the category of micro-enterprises, by aggregating the revenues of linked enterprises for the ceiling of EUR 500,000, generates uncertainty and a total lack of predictability for the implementation of business plans. In reality, the introduction of linked enterprises in the calculation of the ceiling for micro-enterprises will affect a larger number of enterprises that will apply income tax than those that had revenues over EUR 100,000 in 2023, CNIPMMR representatives explained.

The provisions that negatively affect micro-enterprises were introduced without the involvement of representatives of the business environment, and especially SMEs, and in this way the correct identification of the needs of the business environment was not succeeded, in relation to the purpose of the national Recovery and Resilience Plan. Under these circumstances, CNIPMMR excludes any new amendment to the Fiscal Code in 2024 and considers that the modification of the taxation system for micro-enterprises proposed in the PNRR will negatively affect the business environment, due to the increase in taxation, which will have an impact on the entire economy.

Moreover, CNIPMMR calls for the reduction of taxation on labour force and the launch of all national and regional programmes for the private sector, worth 6.1 billion euros, to constitute the Package of programmes to support SMEs, given that they are the most affected, in the current context, marked by the increase in taxation.